RIL's pre-tax profits past ₹1 lakh crore; Is demerger on the cards?

Reliance Industries Ltd (RIL), the largest Indian company by market value, posted a 7.3% increase in consolidated net profit at ₹79,020 crore in FY24 when its gross revenue crossed ₹10 lakh crore. The two young businesses in the conglomerate--- Reliance Retail Ventures Ltd (RRVL) and Jio Platforms Ltd (JPL)--- registered profits of ₹11,101 crore (up 20.9%) and ₹21,423 crore (up 12%), respectively. The standalone profit of RIL, which houses the mainstay oil refining and petrochemicals businesses, stood at ₹42,042 crore, compared to ₹44,190 crore in the previous year.

What next is the question now. The group’s consolidated net debt stood at ₹1.16 lakh crore despite its 5G rollout that cost ₹2 lakh crore and massive retail and FMCG expansions. The exploration and production investments in KG Basin are also over. It still has a cash and cash equivalent of ₹2.08 lakh crore on books. Considering the current cash flow, the company will be able to repay its entire net debt portion with its profit of one and a half years.

It has only one major investment pending at present--- the five giga factories for solar panels and storage battery manufacturing. The earmarked investment for the project is ₹75,000 crore.

The investors expect a demerger now with IPOs of Jio and retail businesses as it would fetch better valuations for the businesses. Both the businesses are led by two separate teams under the chairman Mukesh Ambai’s children Isha and Akash. The businesses have reached the size to generate cash flows to meet capex and manage the debt.

RIL is valued at ₹20 lakh crore in the stock market at a price to equity of 44.83.

Mukesh Ambani said in the FY24 result statement that the initiatives across RIL’s businesses have made a remarkable contribution towards fostering growth of various sectors of the Indian economy. He added that RIL became the first Indian company to cross the ₹1 lakh crore threshold in pre-tax profits.

The digital services business has been boosted by accelerated expansion of subscriber base, supported by both mobility and fixed wireless services. It has over 108 million 5G customers. Reliance Retail, which started opening stores aggressively since 2016, has 18,836 stores across the country. It has also started its new FMCG business with acquisition of brands and launch of new ones. The KG-D6 block has achieved 30 MMSCMD of production and now accounts for 30% of India’s domestic gas production.